C&F Financial (NASDAQ:CFFI) Is Increasing Its Dividend To $0.46

C&F Financial Corporation (NASDAQ:CFFI) will increase its dividend on the 1st of April to $0.46, which is 4.5% higher than last year's payment from the same period of $0.44. Despite this raise, the dividend yield of 2.3% is only a modest boost to shareholder returns.

See our latest analysis for C&F Financial

C&F Financial's Payment Expected To Have Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end.

C&F Financial has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on C&F Financial's last earnings report, the payout ratio is at a decent 29%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, earnings per share could rise by 2.4% over the next year if the trend from the last few years continues. If the dividend continues on this path, the future payout ratio could be 29% by next year, which we think can be pretty sustainable going forward.

C&F Financial Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $1.20 in 2015 to the most recent total annual payment of $1.76. This works out to be a compound annual growth rate (CAGR) of approximately 3.9% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

C&F Financial May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Earnings has been rising at 2.4% per annum over the last five years, which admittedly is a bit slow. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

We Really Like C&F Financial's Dividend

Overall, a dividend increase is always good, and we think that C&F Financial is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for C&F Financial that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.